Finances are getting tighter on the farm. The Agriculture Department announced the July Federal order Class III benchmark milk price at $22.52 per hundredweight, down $1.81 from June but $6.03 above July 2021 though it’s the lowest Class III since March. The seven month average stands at $22.89, up from $16.90 at this time a year ago, $17.30 in 2020, and $15.58 in 2019.
Late Friday morning Class III futures portended an August price at $19.94; September, $19.40; October, $20.05; November, $20.40; and December at $20.20. That would result in a $21.68 average for the year $1.12 shy of the USDA’s latest projection of $22.80.
The Class IV price is $25.79, down 4 cents from the record high June price, but is $9.79 above a year ago and the highest July Class IV price ever. Its seven month average is at $24.83, up from $15.01 a year ago, $13.78 in 2020, and $16.11 in 2019. USDA predicts a $24.70 Class IV average for 2022.
You’ll recall preliminary USDA data showed June milk production was up 0.2% from June 2021. StoneX adds that fat and protein in the milk was up as well giving us about 1.3% more milk solids to make dairy products with. The June Dairy Products report shows where that milk went or didn’t.
June cheese production totaled 1.157 billion pounds, down 2.3% from the May total which was revised 4 million pounds lower, but is 2.7% above June 2021, 20th consecutive month output topped that of a year ago. Cheese output year to date (YTD) stands at 7.0 billion pounds, up 2.5% from a year ago.
Italian cheese totaled 484.6 million pounds, down 0.4% from May but 4.2% above a year ago. American type cheese, at 462 million pounds, was down 4.0% from May but up 1.0% from a year ago. Mozzarella totaled 385.2 million pounds, up 5.7% from a year ago.
Cheddar output, the cheese traded at the CME, slipped to 333.5 million pounds, down 1.1 million pounds or 0.3% from May, but was up 3.7 million pounds or 1.1% from June 2021, ending three consecutive months it was below a year ago. YTD Cheddar is at 1.96 billion pounds, down 2.5% from a year ago.
June butter totaled 160.5 million pounds, down 19.6 million pounds or 10.9% from May, but 3.5 million or 2.3% above a year ago. YTD butter output is at 1.1 billion pounds, down 2.9% from a year ago.
Yogurt output totaled 391.4 million pounds, up 0.5% from a year ago.
Dry whey production slipped to 82 million pounds, down 2.2 million pounds or 2.6% from May, but 5.6 million or 7.4% above a year ago. YTD, whey is at 482.8 million pounds, up 3.0%. Stocks totaled 69 million pounds, down 3.2 million pounds or 4.4% from May but 7.4 million pounds or 12.0% above a year ago.
Nonfat dry milk dropped to 169.7 million pounds, down 23.3 million pounds or 12.1% from May and 15.9 million or 8.6% below a year ago. YTD powder was at 1.1 billion pounds, down 7.2%. Stocks crept to 317.4 million pounds, up 900,000 pounds or 0.3% from May, but down 31.8 million or 9.1% below a year ago.
Skim milk powder output climbed to 45.2 million pounds, up 6.5 million pounds or 16.8% from May, but down 9 million or 16.6% from a year ago. YTD SMP was at 225.4 million pounds, down 25.7% from 2021.
Don’t look to the Global Dairy Trade for any rally just yet. The August 2 weighted average did a repeat of the previous event, dropping 5.0%, making it the fourth decline in a row.
Declines occurred in every product offered, led this time by buttermilk powder, down 9.2%. Whole milk powder was down 6.1%, after dropping 5.1% on July 19, and skim milk powder was down 5.3%, after leading the declines last time with an 8.6% drop. Butter was down 6.1%, after slipping 2.1%, and anhydrous milkfat was off 1.4%, following a 2.1% slip. GDT Cheddar saw the smallest decline, down 0.7%, after dropping 2.0% on July 19.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.2987 per pound U.S., down 14.8 cents, and compares to CME butter which closed Friday at $3.01. GDT Cheddar, at $2.1763, was down 1.2 cents, and compares to CME block Cheddar Friday at $1.7850. GDT skim milk powder averaged $1.5983 per pound, down 8.4 cents. Whole milk powder averaged $1.6077 per pound, down a dime. CME Grade A nonfat dry milk closed Friday at $1.5025.
North Asia market share remained weaker than last year, according to StoneX, falling below 40% in this event, but “SE Asia, Middle East, and Europe picked up purchases bringing their market share levels higher than year-ago levels.”
August 9 will be the first “GDT Pulse,” an effort with Fonterra to “enhance liquidity in GDT,” according to its website. It will run on the opposite weeks of the normal event for six to twelve months and only offer Fonterra whole milk powder.
On a brighter note, June U.S. dairy exports remained impressive, despite all of the shipping challenges. Speaking in the August 8 Dairy Radio Now broadcast, HighGround Dairy’s Lucas Fuess said cheese exports, at 96.8 million pounds. That surpassed the record set in March, he said, and were up 30.8% from a year ago. The top 10 buyers saw increases, with Mexico remaining the biggest.
Butter totaled 12.9 million pounds, also impressive, he said, up 63.1% from a year ago, after a slight dip in April and May. Canada was the top destination.
Unfortunately, nonfat dry milk exports were down from a year ago for the seventh consecutive, falling to four month lows, at 152.6 million pounds, down 14%, which explains the weakness at the CME, Fuess said.
Dry whey exports totaled 41 million pounds, up 7.5%, according to the USDA.
Cooperatives Working Together (CWT) member cooperatives accepted three offers of export assistance this week to help capture sales of 952,000 pounds of American-type cheese. The product is going to customers in Asia and Middle East-North Africa, and will be delivered through January 2023.
Lack luster demand with ample supplies sums things up at the CME. Cheese was down for the fifth week in a row. Block Cheddar fell to $1.7650 per pound Thursday, lowest since January 27, but regained 2 cents Friday to close at $1.7850, down 9.50 cents on the week, 61.25 cents below its April 18 peak, but 15 cents above a year ago.
The barrels fell to $1.7475 Thursday, lowest since January 11, but regained 4.50 cents Friday to finish at $1.7925, also 9.50 cents lower on the week but 48.25 cents above a year ago. CME sales totaled 6 cars of block and 16 of barrel.
Midwest cheesemakers say milk is available despite summer heat drawdowns. Spot prices ranged $3 to $1 under Class III at midweek. Cheese demand received a shot in the arm in recent weeks, says Dairy Market News, as customers are more willing to pay sub-$2 per pound prices.
Cheese demand is softening in the west in retail and food service. Some restaurants in the region have reduced hours and cheese purchases due to labor shortages and higher costs, while International demand is unchanged.
CME butter shot up to $3.06 per pound Wednesday, highest since Sept. 25, 2015 when it set a record at $3.1350. Wednesday’s price was 7.50 cents shy of that but fell to a Friday finish at $3.01, up 2 cents on the week and $1.3625 above a year ago. There were 11 sales on the week. Interestingly the butter also saw the biggest single day collapse in December 2015, plunging 49 cents.
Central butter producers report that cream is still available regionally and from the West. Butter sales are ticking up as summer progresses and customers prepare for fall demand. The $3 plus prices are expected to put a damper on buying, says DMN. Potential buying slowdowns in the fall will only push more demand in the winter. Most expect butter to maintain firmness near to mid-term.
High temperatures in the west are contributing to lower milk output and reduced components. Cream availability is tightening but demand is strong. Scheduled maintenance, labor shortages, and high temperatures are contributing to reduced butter output. Retail and food service butter demand is steady to lower.
Grade A nonfat dry milk did not have a good week, closing Friday at $1.5025 per pound, down 13.75 cents on the week, lowest since Oct. 13, 2021, but still 24.75 cents above a year ago. There were 16 sales reported on the week.
Dry whey fell to 42 cents per pound Wednesday but closed Friday at 43.50 cents, down a penny on the week and 10.50 cents below a year ago, with 1 sale.
Getting back to farm finances; feed inputs keep rising as milk prices slide. The USDA’s latest Ag Prices report shows the June milk feed price ratio at 1.93, down from 1.98 in May, but compares to 1.59 in June 2021.
The U.S. All Milk Price average, after hitting a record high in May, slipped to $26.90 per cwt., down 40 cents, ending nine consecutive increases, but is $8.70 above June 2021.
The national average corn price climbed to $7.37 per bushel, up 11 cents from May, after jumping 18 cents the previous month, and $1.37 above June 2021.
Soybeans averaged a record $16.40 per bushel, up 30 cents from May, after gaining 30 cents the previous month, and $1.90 per bushel above June 2021.
Alfalfa hay averaged a record $245 per ton, up $1 from May, and $46 per ton above a year ago.
The June cull price for beef and dairy combined averaged $90.20 per cwt., up $3.50 from May, $16.30 above June 2021, and $18.60 above the 2011 base.
Quarterly milk cow replacements averaged $1,710 per head in July, up $140.00 from April, and $330 above July 2021. Cows averaged $1750 per head in California, up $310 from April, and $400 above a year ago. Wisconsin’s average, at $1,870 per head, was up $160 from April, and $390 above July 2021.
Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri, said “June’s drop in the income over feed calculation was the third decline the past ten months. June’s income over feed costs dropped below $13.00 for the first time since February, but were above $8 per cwt. for the ninth month running.
“For 2022, milk income over feed costs (using July 29 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.42 per cwt., a loss of 99 cents per cwt. versus the previous month’s estimate. 2022 income over feed would be above the level needed to maintain or grow milk production and $4.55 per cwt above the 2021 level,” according to Brooks.
In the week ending July 23, 57,500 dairy cows were sent to slaughter, up 2,000 head from the previous week, but 100 head or 0.2% below a year ago.
Speaking of feed, the latest Crop Progress report shows 80% of U.S. corn was silking, as of the week ending July 31, 9% behind a year ago, and 5% behind the five year average. Data shows 26% is at the dough stage, 9% behind a year ago, and 5% behind the five year average. 61% of the corn was rated good to excellent, 1% behind a year ago.
Soybean blooming was at 79%, up 15% from the previous week, but 6% behind a year ago, and 1% behind the five year average. 44% were setting pods, up 18% from the previous week, 12% behind a year ago, and 7% behind the five year average. 60% of the crop was rated good to excellent, same as a year ago.
The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. says “Dairy margins weakened slightly over the second half of July as milk prices were largely flat while projected feed costs rose a bit.
The report detailed the June Milk Production and Cold Storage reports, adding; “Feed markets were relatively quiet although corn has caught a bid recently with updated near-term weather forecasts suggesting above-normal temperatures with below-normal precipitation across the Corn Belt as 68% of the U.S. remains under some degree of drought.”
Meanwhile, U.S. farm expenditures were estimated at $392.9 billion for 2021, up from $366.2 billion in 2020, according to the USDA’s Farm Production Expenses Summary. The 2021 expenditures were up 7.3% compared with 2020, and for the 17 items included, 15 increased from the previous year, while two showed a decrease. The four largest expenditures totaled $189.4 billion and account for 48.3% of total expenditures. They included feed at 16.6%; farm services, 11.5%; livestock, poultry and related expenses, 10.8%; and labor at 9.4%.
The U.S. average per farm was $196,087, up 7.7% from $182,130 in 2020. On average, U.S. farms spent $32,540 on feed, $21,161 on livestock, poultry, and related expenses, $22,458 on farm services, and $18,366 on labor.
The 2020 average for feed was $28,250, $22,232 on farm services, $19,695 on livestock, poultry, and related expenses, and $18,253 on labor. Total fuel expense was $12.9 billion.
Diesel, the largest sub-component, at $8.4 billion, accounted for 65.3%. Diesel expenditures are up 18.6% from the previous year. Gasoline, at $2.4 billion, was up 22.7%. LP gas, at $1.4 billion, was up 11.6%.
The Midwest region contributed the most to U.S. total expenditures at $124.9 billion (31.8%), up from $112.8 billion in 2020. Other regions, ranked by total expenditures, are the Plains at $99.2 billion (25.2%), West at $86.7 billion (22.1%), Atlantic at $42.9 billion (10.9%), and South at $39.2 billion (10.0%).
